Interim CEO of Lockton Companies Singapore Peter Jackson examines political risk in the Asia-Pacific region

Political risk has been a hot topic of late. In Asia, incidents affecting commercial operations in Thailand, Vietnam and Myanmar – not to mention the South China Sea tensions – have all hit the press.

Certainly, companies are becoming more aware of regional political risk, and the need for sound crisis management and related insurance coverage. But experienced Asian operators also know this has been part of the general commercial landscape for decades.

After all, the emerging economies in South-East and East Asia do not bring profit without a certain risk profile.

Perhaps the biggest change for businesses operating in Asia is the increasing breadth and depth of the supply chain. Large-scale infrastructure projects are increasingly becoming cross-border in nature.

Chinese, Middle Eastern, and European investors are now taking an active role in major projects, such as in the Sarawak Corridor of Renewable Energy (SCORE). The money involved is staggering – some $30 billion for that project alone.

Businesses want their investments protected. Regional disputes and social and political volatility are, of course, areas for concern. There is a lot at stake.

Political risk insurance, once seen as a ‘nice to have’ cost, is now becoming a ‘must-have’ feature of a risk infrastructure. It’s hard to relocate a hydro dam if things start to go wrong… and no one enjoys having to explain to a board of directors how and why your factory or aluminium smelter just got nationalised.

The involvement of international businesses in regional projects is also driving a change in corporate culture throughout Asia. The extra-territorial reach of the US judicial system, for example, is having a profound effect on corruption, money laundering and corporate governance.

Senior management and company boards have now found themselves liable for the way business is conducted. There is a far greater need for commercial transparency and best-practice procurement and pitching than ever before with associated D&O insurance to protect board members from litigation brought on by volatility of new markets and new risks.